Exposure Analysis Checklists in Commercial Lines

For the last 25-plus years, the No. 1 cause of errors and omissions (E&O) claims has been “failure to provide the proper coverage.” In 2013, many E&O carriers reported that this accounted for more than half of their E&O claims. Typically, when your insured suffers a loss that is either not completely covered or not covered at all, the customer may consider bringing an E&O claim if he or she believes your agency was negligent. The most effective way for your agency to address this issue is through the use of an exposure analysis checklist.

Tremendous Benefits

There are many benefits to using exposure analysis checklists. For your staff (producers and CSRs), checklists are a fantastic educational tool, providing solid information on more than 650 different classes of business and the exposures they present. A narrative detailing the background of that class as well as general underwriting characteristics (by line of business) and the various coverage considerations is provided.

There are several checklists in the marketplace. For new and veteran producers, checklists are invaluable given the knowledge they provide. Producers would no doubt benefit in doing some homework, via a checklist, before visiting a new prospect.

Another benefit is that checklists provide all of the possible SIC codes for general liability and workers’ compensation, ensuring that your submissions are complete, thorough and contain the right information. There is a good chance this will result in a more competitive proposal, too, because the underwriter will better understand the exposures.

The checklist is a great E&O prevention tool as it ensures that the coverage options are not overlooked. For those coverages that the customer rejects, require the customer to sign the document confirming his or her rejection. This documentation will be extremely valuable in your defense should a claim be made against you alleging that the client/prospect thought he or she had requested this coverage.

Gaining Efficiency

Some exposure analysis checklists not only contain all of the necessary ACORD forms, but in many cases these forms are interactive, adding to the efficiency of the process. Some of the checklists have a feature enabling you to email the application directly to the various carrier underwriters, with a built-in tracking system allowing you to know the status at any time. This should result in a significant gain in efficiency, so staff members can meet more prospects and sell more insurance.

A feature that can be especially beneficial is the ability to generate a professional-looking proposal, complete with color and graphics. To ensure that your customer/prospect clearly understands his or her insurance program and how it works, it is advisable to include definitions of the various key insurance terms. This proposal feature will positively position your agency and may be vital in securing the account.

While many agencies use these checklists predominately for commercial lines accounts, there is a place for them with your personal lines customers, too. Many agencies combine a well-written letter with the checklist and mail them to their customers, asking each customer to advise the agency of any change in exposures. Once again, this will serve as solid documentation in the event an E&O claim is brought against you by that customer.

An Unbeatable Combination

While these exposure analysis checklists serve as a great E&O risk management tool, there is no doubt that using them will result in your agency writing more business. By interacting with your customers/prospects and discussing the available coverages customers should consider, you will enjoy enhanced sales success that will more than pay for the cost of these systems.

If you are not currently using a checklist, it is well worth your time to explore them further. They provide solid knowledge for your staff and your customers, and provide a systematic approach to identify the exposures your customer should consider. With effective use, they will not only serve as key protection should your agency be faced with an E&O claim, but you will write more business. That’s an unbeatable combination.

Topics Commercial Lines Business Insurance